A Mileage Tax Is the Right Way to Fund California's Transportation Infrastructure

There is a saying that as a politician you don't want to be too far in front of, nor too far behind public opinion. While public opinion can be destiny for many political debates and decisions, there are times, however, when politicians need to drive public opinion to achieve efficient and effective policy outcomes. In California, transportation infrastructure funding is one of those areas.

One of the items examined in the Hoover Institution's January 2016 Golden State Poll was reforming how California funds its transportation projects, specifically after given more information how do likely voters feel about replacing the existing gas tax funding regime with a mileage tax. Overall, public opinion is decidedly against replacing the gas tax with the mileage tax. When given no background information, likely voters by over a 2-to-1 margin oppose the replacement. When the proponent's best argument - that the gap between miles driven and gas tax revenue is only widening - is presented, opposition doesn't budge. And finally when the opponent's argument is added in - that there may be privacy concerns - opposition swells to over 3-to-1.

Needless to say, the opposition begins in the driver's seat. But that doesn't mean proponents shouldn't try to fight for this reform. For one, the gas tax isn't a viable funding source any more. And secondly, a mileage tax, even with its downsides, presents a more efficient and effective alternative, especially with the rise of electric vehicles.

Up until recently, gas consumption was a good approximate for road use. However, that is no longer the case. Net taxable gasoline sales per capita have decreased 12% in the last decade (note: all statistics are for Q1 to Q3 of each year to allow 2015 to be included). Meanwhile, vehicle miles traveled per capita has dropped 4% over the same time period. But this masks a more important divergence. Between 2006 and 2009, both vehicle miles traveled per capita and net taxable gasoline sales per capita decreased at an almost identical pace, but since 2009, vehicle miles traveled per capita started to increase (4.6% between 2009 and 2015), while gasoline sales per capita continue to plummet (4.1% between 2009 and 2015), leading to a widening gap between the two.

2009 was a turning point in new vehicle registrations in California. Between 2007 and 2009, new registrations decreased 44%, but since 2009, new registrations have increased each year. Moreover, since 2009, regular hybrid, plug-in hybrid, and electric vehicle new registrations increased over 116% and as of 2015 Q3, such vehicles accounted for almost 9% of all light vehicles in California. Between overall better gas fuel efficiency in traditional gas-powered vehicles and more interest in hybrids and electric vehicles, the widening gap between gas consumption and miles traveled likely isn't an anomaly that will reverse.

This brings us to the mileage tax. Now that gas consumption is no longer a good approximate for road usage, funds collected to maintain and modernize California's roads are no longer sufficient. Taxing miles driven versus gas consumed means California is directly taxing road wear-and-tear, not an approximate of such. This inherently means the mileage tax is more efficient and more effective in its intended goal - raising funds for transportation infrastructure maintenance. Moreover, by taxing actual miles traveled versus an approximate, it means no one can skirt the tax. To illustrate, take those who drive electric vehicles. Because electric vehicles by their very nature require no gasoline, their drivers pay zero gas taxes. Yet, electric vehicles still use the roads no differently than a traditional vehicle. As a result, these drivers are using something for which they will never pay the maintenance cost. Add in the fact that the typical electric vehicle owner is wealthier than the average traditional car buyer and California's transportation infrastructure funding burden is being placed more and more on low-to-middle income individuals.

All of this doesn't mean there aren't serious implementation challenges and concerns related to the mileage tax that need to be examined and addressed nor does it address the inefficient transportation bureaucracy in the state, but California needs a modern, 21st century approach to how it funds its transportation infrastructure maintenance and modernization and while the mileage tax does start with serious opposition, this is one of those areas where the state's elected leaders should lead public opinion rather than follow it.